Most people have their retirements in the stock
market via 401k, Roth IRA or traditional IRA.
If you have your money in an investment company,
a financial advisor like Edward Jones or Raymond
James or Charles Schwab, you could be losing
tens of thousands, if not hundreds of thousands
of dollars over the lifetime of your account,
which could adversely affect the amount of money
you have to retire with. And today I'm going
to talk about why this is and what you can do
about it. Let's get into it. If we haven't met
before, my name is Doug Barinas. I'm a licensed
real estate agent in Washington and Oregon, as
well as an accredited investor. And today I'm
going to talk about these asset under management
fee. So. And I've been a customer of these. So
I'm going to let you give you the inside scoop
because at one point I was a customer of Edward
Jones and I left them several years ago and it's
been great. I have no regrets about it at all.
And so here are the fee structures that these
companies tend to charge. They tend to charge
fees based on assets under management, which
is the total amount you have in your account.
And these fees are typically 1%. of your account
balance. And so if you have $100 ,000 in your
account, that's $1 ,000 a year based on my estimates.
And so you think to yourself, wow, okay, 1%.
That's not a lot. No problem. But when I pay
for things, typically, I want there to be a tangible
reason I'm paying somebody for that service.
So if I pay a plumber $600, I want to know that
my pipes are going to be fixed. If I pay someone
to clean my house or do some other kind of task,
I know what I'm paying for. I get that service
and I'm happy to pay for it. Everything's up
front. But with these firms, you're not getting
that because they're charging you in a couple
of different ways. So one is that 1 % that I
mentioned. And you think to yourself again. 1
% is not very much. Well, 1 % compounded over
time can end up being tens of thousands, hundreds
of thousands of dollars over the lifetime of
your account. So it's not nothing. You're not
paying, it sounds small, but in the end, it's
still a significant amount of money when you
factor in what that could be doing for your portfolio
over time compounding at an average of let's
9%, which is sort of the typical historical stock
market return. you know, 8 % to 10%. And so again,
great, what am I getting for 1 %? That is the
question. Because when you go to these companies,
they will tell you that their target rate of
return is 8 % to 10%, which magically corresponds
to what you would get, the returns you would
get if you just put your money into an index
fund that tracks the S &P 500 or the total stock
market, you would be getting 8 % to 10%. Great.
So why am I paying you 1 % to do this? Because
you are not getting asymmetrical returns. You
are not getting returns that are going to be
higher than the market average. And they will
tell you this. If you ask them what the return
is, they tell you the return. It's what the average
return of the stock market is. Great. So I'm
paying for something and I'm not getting anything
extra. I'm just getting the standard return if
I just socked it into an ETF. And the whole reasoning
behind these financial investment firms is they
make everything look complicated. They make it
seem complicated and that you can't do it without
their help. Like you cannot possibly negotiate
the stock market investing thing because it's
too complicated. And people go, oh, it's too
complicated. I can't do it. Here's my money.
But the truth is, it's not very complicated and
you can do it yourself and you can get the same
returns for a fraction of that 1%. But it's not
only that they charge you 1%. So that's already
sort of a very, in my mind, sort of unethical
way to present what they're doing. Like they're
charging you, they're just charging you for market
returns that you could get anywhere, but they're
charging you more money. And then on top of that,
they are going to they get commissions from certain
funds that they push, that they recommend and
that they use. And so when I was with Edward
Jones, they had me in like 13 different funds,
all of which were basically with the same company.
And when I looked at the expense ratios of these,
so the expense ratios is basically what the fund
charges you to manage that fund. And so they
can range anywhere from point zero. 2 % to almost
2%. And so what these funds were charging me
on top of that 1 % was outrageous. So I'm talking
about like, I think the lowest one was like 0
.65%. So getting close to like... almost 1 %
fees. And these are actively managed funds. And
historically, actively managed funds have not
outperformed passively managed index funds. Historically,
they have not done as well. So I'm paying them
again twice because I'm already paying that 1
% to get market returns. And then I'm getting
into 13 funds. It doesn't need to be that complicated,
people. You don't need 13 funds. I have a total
stock market fund. domestic. So an American total
stock market fund, a total international stock
market fund. And then I have a couple, an international
bond and a domestic bond fund. So really four
funds is pretty much what you need. You do not
need 13 funds. So I was being sold. I bought
13 funds through them. That's where they put
my money. And then the expense ratios were astronomical,
like 1 .5%, 0 .65%. So ridiculous. So that's
also costing me a lot of money. So not only am
I paying the 1%, I'm paying the exorbitant expense
ratios, the management fees for all these other
funds that they're setting me up with. So that's
another way that they get you. And so, you know,
and then every year you got to go through these,
you know, advising that they call you in to go
over your portfolio and it's a big deal. And
they pull up all these charts and they tell you
all, they use all this lingo and you're like,
Oh, I couldn't possibly do this. I challenge
you if you use one of these companies like an
Edward Jones or a Schwab or one of these asset
under management funds, because when they charge
you that 1 % and your fund grows, then they're
making more money. It's 1%. Why are they making
more money doing the same thing that they did
when you had 100 ,000 that they do when you have
a million? There's not really a reason for that
other than them making some money. Now, a lot
of people, if you're the kind of person who...
watches the stock market all the time and like
hits the panic button and wants to sell everything
when it goes down a little bit, then maybe you
do need somebody like Edward Jones to like talk
you off the ledge. So you're not just panic selling
everything. I suspect if you're watching this
video, maybe that's not what you do when the
stock market goes down. If you feel like so nervous
and you need somebody to talk to who's like,
okay, calm down everybody. Because that's kind
of the emails I would get from them. don't worry,
the stock market historically does this and it
goes up, so don't sell everything. And I was
like, I don't need you to tell me this. And this
doesn't take a lot of research. People think
investing is so complicated and really it's not.
Dollar cost averaging, so consistently contributing
to a diversified fund that tracks the S &P 500
or the total stock market. Over time, you're
going to get those returns. They go down, they
go up. And over time, that's the return you're
going to get. I don't need to pay 1%. And I don't
need you to load my fund up with 13 funds that
charge me exorbitant expense ratios. That's just
crazy. And so the solution to this, and there's
plenty of ways to invest. Most people invest
in the stock market. So I mean, I think this
video is for people that aren't professional
investors. Maybe they have a limited interest
in investing. You're certainly smart enough to
realize that you don't need to pay somebody to
get you market average returns. You don't need
to get them 1 % on top of these crazy fees. So
at the end of the day, when I was a customer
at Edward Jones, I did my research on these fees
and it just didn't make sense to me. And finally,
I just called my guy up and was like, I don't
understand what I'm paying you. Or if you're
not providing me asymmetrical returns, which
they're not, they're not guaranteeing you anything
other than average market returns, then why am
I paying you? What are you doing for me? It's
the question I asked. And I couldn't get an answer.
It was like a blubbering. And it just didn't
make sense. And I was like, I'm out. Thank you
for all you've done. I'm going to move my funds
over to. what I think is a good solution. Again,
I don't own any, I'm not a financial advisor
myself, not financial advice, but what I did
is I moved them over to Vanguard. I already had
an account there. I like Vanguard. I don't get
sponsored by them. I think Fidelity has low cost
funds too. I just use Vanguard. And so I brought
all my money to Vanguard that I had at Edward
Jones and I used a robo advisor. So they basically,
you take a quick survey on what your goals are.
And you can, you have the option to talk to somebody
there, or you can just fill out the survey, do
the robo investing. I think the fee is like 0
.25 % a year. So considerably less, 75 % less
expensive than what you're going to get at, you
know, Edward Jones or Raymond James or one of
those companies. Because I didn't need somebody
to call. I didn't need to go into a meeting every
year with all these graphs and tell me how I'm
doing. Because like, I basically could just see
how I'm doing because it was all market returns.
I didn't need to waste my time with that. I didn't
need you to talk me off a cliff. I just needed
a way to automate my investing. It gets rebalanced
automatically. And again, I'm still planning
on checking in with a financial advisor. But
if you're going to do that, I recommend a fee
-only financial advisor. They don't base their
fees on your assets under management. They charge
you either a flat fee or an hourly fee. And so
they're able to take a look at your portfolio,
give you some advice. tell you what you might
need to do. But really, it's a lot less complicated
than people make it out to be. It can get complicated.
But for what Edward Jones and similar companies
were doing, it certainly wasn't worth the fees
for what they were doing. Not at all. I've been
super happy using the robo -investing strategy.
where I'm just sending them money every month.
It gets put into the four funds. It gets rebalanced.
No problem. No worries. And then I bring on the
help of a fee only. So they're, again, not charging
me based on how much money I have. I'm just paying
them a fee. They're fiduciaries. They have no
skin in the game. I'm just paying them the money.
They're giving me the advice. They're certified
financial planners as well. they have fiduciary
rules. Like the people at Edward Jones will tell
you, I'm a fiduciary. I have your best interests
in mind. But the definition of that is pretty
vague. And there's ways to get around it because
what they were doing, it was not fiduciary. It
was, I repeat, not fiduciary. To charge me that
amount and to load me up with a bunch of funds
that were expensive did not have my best interests
in mind. The fact that they even said they were
a fiduciary, I don't think so. They get around
it by saying, oh, well, it's in general, this
is their best interest. Like they have their
money in a retirement account. It's making money.
So I'm helping them. And it's that's in their
best interest. So I am a fiduciary, but they're
not a fiduciary because if they were, they'd
be like, why don't you just get a couple of Vanguard
or Fidelity accounts? The expense ratio on the
highest expense ratio on any of my accounts,
I believe, is like point zero six. So not a lot.
Not a lot at all. Like $0 .06 per every dollar
I have in there. No, that's not true because
that would be 6%. It's a crazy low amount. So
the expense ratio is something you also have
to look into if you have an account with one
of these companies because what funds are they
putting you in? Take a look. I hope this was
helpful. I did a video recently on if you own
your home and you're looking to retire, a great
strategy for recapturing the interest on your
mortgage and getting consistent monthly payments
by being the bank on your home. I'm going to
link it up here. And I hope this has been helpful.
If you're a customer of any of these companies
I've been talking about, or if you've had an
experience with these companies that you'd like
to share, I'd love to hear about. what you think
about this, because I think it's really outrageous
to charge these fees for people and take advantage
of people's kind of disinterest or their just
ignorance of investing, basically. And I mean
that in the purest sense of the word, where you
just don't know. And then these firms come in,
make it seem scary and big. and charge you a
bunch of fees. So if you have experience with
these companies or you work for one of these
companies, I'd love to hear from you too. I've
been wrong before, but in my experience, I have
not seen what the value is in having a retirement
account with one of these companies and I don't
recommend them. So hope this has been helpful.
If it has, don't forget to hit the like, consider
subscribing if you like, and I hope you have
a wonderful day. Take care.